Answer (C) is correct . The price elasticity is calculated by dividing the percentage change in quantity demanded by the percentage change in price. The numerator and denominator are both computed as the change over the range. Thus, the change in quantity demanded of 100 units divided by the sum of quantities demanded of 1,900 produces a quantity decrease of 10.526%. The price increase of $1 divided by the price range of $7 results in a price increase of 28.571%. Dividing 10.526% by 28.571% results in an elasticity coefficient of .3684, or .37 rounded.
Answer (A) is incorrect because The inverse of the price increase divided by the original, not the average price, is 3.00.
Answer (B) is incorrect because The inverse of the correct coefficient is 2.71.
Answer (D) is incorrect because The percentage change in price would be 0.33 if the original, not the average, price was used in the denominator.
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